Named after Title 26, of Section 125 of the United States Code, "cafeteria plans" are specifically excluded from the calculation of gross income for federal income tax purposes.

The YourSource Section 125 plan allows employees to contribute to their benefits through pretax dollars. Contributions toward plans are not subject to federal, state, or social security taxes. And, because the employee is paying a portion of the benefits premiums, premiums are lowered for businesses and smaller employers can more easily offer benefits.

There are still greater benefits to the employer:

  • FICA Contribution Savings – Since the employees’ contributions are not subject to social security tax (FICA), the employer does not have to pay its matching contribution either. Thus, your business can save 7.65% on every dollar contributed.
  • Workers’ Compensation Premium Savings – Since workers’ compensation premiums are based on payroll, the employer’s payroll is reduced by every contribution resulting in lower workers’ compensation premiums.
  • No administration – The most common deterrent to implementing a Section 125 plan is the administration post enrollment. Through YourSource the administration typical with these plans is eliminated. Contributing employees participating in benefits are automatically enrolled into the plan and begin receiving the pretax benefits.